Sucheta Dalal :Troubled times?
Sucheta Dalal

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Troubled times?  

Mar 28, 2005


One of the most animated whispers on the corporate grapevine is about tensions at a large, shadowy conglomerate, whose businesses are all as public as its finances are private. The high-profile founder of the group has not made a public appearance in well over three months. There are many stories circulating about his absence, since even senior group executives are clueless. One is that he goes underground when he suffers occasional bouts of serious depression; another says that he is abroad for crucial medical treatment. Meanwhile, the group’s star-studded family is already wracked by discord. A simple manifestation of its problem is in market reports that its seemingly endless source of funds appears to be drying up. Dozens of film producers commissioned by the group are seriously worried because their money is not easily forthcoming anymore. Meanwhile, the bigger worry for the group is probably the massive investigation into its operations and source of funds by the Reserve Bank of India and the Intelligence wing of the government. Our sources say that although a detailed and damaging report is ready, action was held back due to political turmoil in three states. Is nemesis catching up with this strange group that has used every excuse to flaunt its enormous wealth even while its finances have been allowed to remain a closely guarded secret? Or will its political networking see it through this situation too? Everything depends on the health of its head honcho.

Rumour verification

Is Reliance Infocomm going to Anil Ambani, or was that the hoax of the week? While the Sensex crashed 80 points on Tuesday, the flare up in Reliance group shares cushioned the fall in a hugely distressed market at the prospect of a settlement between the Ambani brothers. A day later, the news fizzled out, although it was clear that reports of a settlement had emanated from one of the warring factions. Three Reliance companies Reliance Industries (RIL), Indian Petrochemicals Corporation (IPCL) and Reliance Capital issued identical and fairly categorical denials to the stock exchanges, which read: “We are not aware of the veracity of the contents of the news report and can make no comments thereon.” But that leads to fresh intrigue. Reliance Energy (REL), which is in Anil Ambani’s charge, had a more ambiguous and slightly tantalizing response: “It is not the policy of the company to comment on speculation and rumours. Developments, if any, which concern the stakeholders of the company, will be intimated in due course, and at the appropriate time”. Does that indicate where the speculation about a settlement had emanated from? For those reading between the lines, there is another intriguing element. It has always been assumed that Anil Ambani controls Reliance Capital, but the pattern of statements to the stock exchanges suggests otherwise. Reliance Capital’s denial statement is identical to that issued by RIL and IPCL and not REL.

Continuing damage

On the possibility of a settlement between the brothers, sources say that the battle is getting more complicated rather than showing signs of ending. We learn that Anil Ambani not only wants a division of assets, but also wants the valuation to build in a ‘control’ premium for relinquishing his stake in the flagship RIL. Clearly the next round of the battle will involve a slugfest over whether either brother can demand a ‘control’ premium when the largest chunk of equity (34 per cent) was held through a complicated web of investment companies, whose ultimate control vested with the Reliance Chairman. Meanwhile, Mukesh Ambani continues to suffer the consequences of the charges against RIL’s corporate practices and the investigation of Reliance Infocomm. A Pan-IIT meet to be held in Washington DC has reportedly dropped Mukesh Ambani from the invitee list, following protests from a section of the IIT alumni about his presence.

Taxing toll

When the Maharashtra government handed over its showpiece Mumbai-Pune Expressway to a private company for maintenance, it was always feared that this would lead to an unconscionable increase in toll. Not only will the Expressway toll increase a hefty 18 per cent from April 1, 2005, but Mumbai-Pune road commuters will suffer a double whammy. The old National Highway 4, which is a bad two-lane drive, will also be tolled from April. At a time when the state is showing pragmatism in other areas, this taxing toll is bound to invite trouble for the government.

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-- Sucheta Dalal